Hitting Close to Home

AN ORGANIZED COMMUNITY One reason the Obama transition team pushed New Mexico Gov. Bill Richardson overboard was concern that other close associates of Obama might be drawn into the burgeoning "pay for play" scandal that is now enveloping not only Richardson, but also the administration of Pennsylvania Gov. Ed Rendell, as well as other prominent Democrats.

"The biggest concern is [Valerie] Jarrett and anyone associated with the public housing industry in Chicago," says an Obama transition team adviser. "Some of Obama's earliest and most influential fundraisers came from the low-income housing industry."

In fact, according to federal law enforcement sources, the company at the center of the "pay for play" scandal, CDR Financial, was about to announce the opening of a new office in Illinois. "They were expecting to make some money there, just how and how much isn't clear yet, but it's something that is being looked at."

Web pages on the CDR website that announced contact information for the Illinois office mysteriously were taken down about a week ago, about the time that Richardson announced he was withdrawing from consideration for Commerce Secretary.

And because of Obama's ties to the housing industry in Illinois, there is growing concern that the CDR story is not something that will go away any time soon, and it threatens to touch some of Obama's closest advisers.

Jarrett, for example, who is expected to serve as the senior adviser to the President, with an office down the hall from the Oval Office, and beyond being perhaps the Obamas' closest friend, and a hardened Chicago Democrat machine cog in the Daley administration, was perhaps the most influential player in Chicago public- and low-income housing for more than a decade.

Since 1995, and until she recently stepped down, Jarrett was a high ranking executive at Habitat Co., a real estate firm that oversaw large segments of low-income and public housing operated by the Chicago Housing Authority. In 2007, she was named CEO.

Jarrett and Habitat could decide how many public, low-income and "lease to own" housing units could be built, approved the budgets and negotiated contracts that included financing and construction.

"Valerie was in a position where she actually signed off personally on many of the decisions the company made," says a longtime Obama supporter in Chicago. "Her family has had ties to the Chicago Housing Authority for decades. No one understands the situation better than she does. In fact, between 2000 and 2007, Habitat earned almost $7 million in administrative fees and collected almost $11 million for expenses from federal and state housing programs. It also earned millions serving as a property manager for the housing authority.

Habitat also stands to make millions more through a ruling that allows development firms to build "market priced" (homes sold at market value), as a proportion of the units built as part of public housing developments.

CDR Financial was a firm that oftenAntoin dealt with state and municipal bonds that are used to construct that kind of housing, and apparently was expecting to do business in Illinois. "It's not uncommon for entities with ties to this level of political influence to focus business on those folks' home state," says a longtime Clinton White House staffer. "Look at how many people with ties to Arkansas got sweetheart jobs to gain access to the administration and the Clinton people."

At least four of Obama's major financial backers -- going back to his campaign for the Illinois state senate -- are involved in public housing finance, construction and/or management.

The most notorious is Antoin "Tony" Rezko, who is credited in Chicago political circles for jumpstarting Obama's political career, and who gave the Obama family a sweetheart financial deal for the family's Chicago home. Rezko's company used city, state and federal housing subsidies to develop more than 1,000 apartments, almost all of them in Obama's state senate district.

Another major contributor is Cecil Butler, who developed with housing subsidy dollars the Lawndale Restoration, at the time the largest subsidized low-income housing project in all of Chicago.

Then there is Allison Davis, who was a law partner of Obama, a fundraiser for his U.S. Senate and presidential campaigns. He was involved with Jarrett in the development of one of Habitat's largest projects, and took advantage of housing subsidies to develop more than 1,500 low-income housing units in Chicago.

Millions have been raised over the years by these three, as well as Jarrett, for Obama's political campaigns.

As first reported by The American Spectator, the founder of CDR Financial, David Rubin, was introduced to the Obama campaign last summer, during the run-up to the Democrat convention in Denver.

Rubin subsequently donated almost $100,000 to various PACs with ties the Obama campaign, as well as to the Democrat National Committee.

"There was some surprise that Valerie didn't seek a cabinet position, but then the more you looked at it, you realized that for a host of reasons, it wouldn't be a good idea," says another longtime Obama campaign staffer. "She is close to President Obama, and she's even closer to Michelle, and given her background with the Daley administration and her ties to folks like Rezko and others, there was just too much exposure. In her current position, she has all the power and influence, and none of the accountability. It's the best of both worlds."

WHERE'S CHARLIE? According to House Democrat leadership aides, Speaker of the House Nancy Pelosi is dealing with the Obama transition team and Ways and Means senior staff on the future Administration's economic bailout proposal, leaving Ways and Means Chairman, Rep. Charles Rangel, out of the initial planning process for the bill.

"[Pelosi] has a tough balancing act, but she doesn't want any distractions from getting the bill through," says a leadership aide. "A large Rangel role would be a distraction."

Pelosi has been under heavy political pressure to remove Rangel from the top tax and revenue committee chairmanship due to numerous ethics issues surrounding his personal finances both in New York and abroad.

Further complicating Pelosi's situation is that the next-ranking Democrat is radical -- and fellow Californian -- Rep. Fortnoy "Pete" Stark, whom Pelosi actually publicly criticized after he said on the floor of the House that House Republicans were going spend appropriations dollars to "blow up innocent people if we can get enough kids to grow old enough for you to send to Iraq to get their heads blown off for the president's amusement."

"She doesn't want to be in the position of having Stark directing Ways and Means if she can avoid it, so the best way is to just cut both of them out of the equation," says the aide.

According to Ways and Means staff, Rangel is angered by the slight, but is being briefed by committee staff on the stimulus package and the negotiations between Pelosi and the Obama transition team.

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